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Is funding your DC Uni costs a false economy?

(17 Posts)
Newmamatobe Tue 29-Mar-16 00:02:05

Call me crazy (DD is a teeny 7 weeks old but I'm a Lone parent and want her secure) I've been tentatively thinking ahead about some of my investments and property so that I'm comfortable to cover private education and what I "wrongly" imagined - university costs.

After research it's actually a false economy to pay for my DD approx £20k per year Uni costs instead of the traditional student loans...

http://www.telegraph.co.uk/finance/personalfinance/10245550/Martin-Lewis-Time-to-stop-calling-student-loans-a-loan.html

Does anyone have any advice or experience around this. My daughter is only 7 weeks old but I want something in place now to save over 17/18 years.

I currently have a Junior ISA in place which will build up a really nice amount for when she reaches Uni age, and a buy to let property designated for her to either rent out and have the income as an allowance (60% equity currently with the hope to pay off the mortgage by the time she is 18). OR live in if she chooses a Manchester University where we live and rent out the second room to a friend for a small income boost.

This is new territory for me, I didn't do Uni and none of my family have ever been to private school either, not sure where to start just that I want to make the right choices for DD.

After a decade of hard graft I've a few things built up and saved that could make a real difference to her to have the start in life I didn't have but you never know what's around the corner either and things may not always be this way....

I'm also looking at level term life insurance for 25 years, again new territory! Ahhh

Anyone willing to share any experience I would be very grateful - my extremely tired whirring mind is getting a tad overwhelmed haha

;-)

Sunshowercap Tue 29-Mar-16 08:50:26

Who knows what they'll have done to further trash one of the world's best education systems in 18 years time?

However, at the moment, yes, it's daft to pay fees upfront - the student loan rate is far better than any commercial loan rate or interest you'd receive on savings. OTOH, if education becomes even more of a political football than it is now, who knows? So a long term tax-effective savings vehicle is a good strategy for whatever happens.

Not sure I'd be bothering with fee paying schools when there are excellent state funded schools all over the place, and I think Manchester still does grammar schools?

donadumaurier Tue 29-Mar-16 09:49:42

It's false economy to pay it all for her, yes, but depending on your income she may not be able to borrow enough to cover everything- my loan doesn't even cover my rent! In which case the parents are expected to help out.

disquit2 Tue 29-Mar-16 09:52:32

The current system isn't sustainable. In 18 years time I suspect that parents will have to pay a lot more than they currently do, or the interest and repayment rates of loans will be much higher. Either way, saving for the future seems wise.

BitchyComment Tue 29-Mar-16 10:05:40

It way to worry over it now as the system will probably have changed a dozen times or more by the tine your DD is old enough how've there is nothing wrong with saving up for her.

If you are interested in the current system them the best advice is on Martin Lewis's MONEYsavingExpert.

EricNorthmanSucks Tue 29-Mar-16 11:50:41

I'll eat my hat if the current loans system is in place in 18 years time.

Start saving OP!

howabout Tue 29-Mar-16 12:58:05

On the one hand the fee cap has just been removed. On the other hand Harvard has enough in endowments to be considering offering fee free scholarships. The impact of the 9% repayment tax is only just being felt for sizeable numbers of graduates. The government has already moved the goalposts in terms of lifting the repayment threshold over time. I agree that I do not think the current situation is stable.

It is a good idea to set funds aside for the future but I would advise keeping them in your own name as this is far more flexible and rules around investments for children is another area where there is constant tinkering.

bojorojo Tue 29-Mar-16 13:25:28

One manor headache for the government is the projection that as many as 50% of graduates may never pay back the loans because their employment prospects are not that good. If you never have to pay back a loan, then it is amazingly good value.

As for buying a flat at university, I am not sure this is always a happy situation for the student as they, in effect, become the landlord and the focus of any complaints. Sometimes it is better to buy the actual rental property you want and take the income from that. This can be in your child's name if you wish.

I think the cost of supporting a child at university will increase so absolutely it is a good idea to save or divert income and savings to that goal. If you are cimfortably off and value private education, then that is your choice. Fortunately with some of the best private schools, you do not have to be grammar school material to get in them so you can look far and wide to ascertain the best fit of school.

disquit2 Tue 29-Mar-16 13:51:38

On the one hand the fee cap has just been removed. On the other hand Harvard has enough in endowments to be considering offering fee free scholarships.

The fee cap has not yet been removed. It has been announced that, subject to assessment of teaching via the TEF, universities will be allowed to increase fees in line with inflation. Fees have been frozen since 2012, and this was clearly not sustainable.

Harvard has had needs blind admission for a while. Harvard would still not be affordable or realistic for many students from the UK and they would have to up their financial aid considerably for it to be accessible to the UK "middle classes".

bojorojo Tue 29-Mar-16 16:37:44

Why is it on MN that people think British students will just walk into free places at Harvard?

howabout Tue 29-Mar-16 16:50:14

Not suggesting that at all bojorojo, but I think it is reasonable to look at arrangements for student financing in an international context if the percentage of overseas students I see at the Universities I have contact with are in any way representative. I mentioned Harvard as an example because there was an article about them in the Economist last week.

bojorojo Tue 29-Mar-16 18:02:16

There are about 7 needs blind uiversities in the USA. They are mostly the Ivy League with huge funds behind them. They are notoriously difficult to get into. They pick the most gifted students and competition is stiff from all over the world. I have seen all sorts of articles that suggest starting salaries are X and scholarship values are Y, but getting them is another matter entirely.

Newmamatobe Wed 30-Mar-16 03:54:46

Thanks for the responses, really helpful.

How about - thanks for the heads up RE saving in a child's name I shall get more details on that too as have a junior ISA in place...

I feel for parents with children wanting to go into medicine or vetinary - ouch costs!! I'm trying to work out a target figure for a fund for her education, has anyone done this?

Varies dependent on the course I'm finding??? Be awful to save and then it not be enough....

FishWithABicycle Wed 30-Mar-16 07:19:47

Who knows what it will be like in 18 years but even now the current maximum loans don't cover basic living expenses except in the cheapest (ie most unpopular, least attractive) places so some of your savings will be needed anyway.

It's silly to pay off the loans and fees up front because you don't know what career your DD will pursue. If she chooses a path that isn't that lucrative she may only ever be liable to repay a small amount per month and only a fraction of the total amount you would pay upfront would ever be due so upfront paying would be a donation to the government.

(Adjusting all figures for 18 years of inflation obviously) You could still keep a chunk of savings for her so that instead of her having to pay 9% of income over £21k you contribute towards repayments so that she only loses 5% of income over £25k (perhaps tapering your support off once she gets to £40k or more?)

OvariesForgotHerPassword Wed 30-Mar-16 07:25:20

Right now it's daft not to take out student loans. Who knows what the system will be like in 18 years.

Have you looked into bonds? Tying your money up for a few years gives a much better return interest wise, with ISA rates so awful.

bojorojo Wed 30-Mar-16 11:12:34

There is no shortage of medical or vet med applications. The loans are not stopping anyone doing it. Vet med and medics get jobs afterwards. Lots of other students find it a lot more difficult. Arts degrees are far less valued than they used to be due to the push for STEM subjects. Parents just have to top up the loans for longer but lots of other careers take years too. It is just a case of saving what you can and deciding if you want private education. That is WAY more expensive than a parent topping up university costs.

MrsGuyOfGisbo Fri 01-Apr-16 19:24:54

Thanks for the link to Martin Lewis!
I wish I had thought it through better a couple of years ago myself when I paid 9k upfront for a rubbish PGCE course - I should have taken out the loan instead because my earnings will never reach a level where I have to pay it back.
With DS is more uncertain, as he obviously has many more years of earning, and the type of course he is doing is one which typically graduates fairly easily find well paying jobs.
Except of course he may find religion and go off and be am missionary grin or as he is a skydiving fanatic may end up with a very short life grin
My own background is very working class/fear od debt, hence my reluctance to be in debt of any kind... DH more relaxed about it.

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